Bank of England governor Mark Carney - who let it not be forgotten has run into some political flak recently - has not yet applied for British citizenship, which he said he would when appointed, Sky is reporting:

The rise in the pound following the court ruling on Brexit and the Bank of England keeping interest rates on hold may not be the end of it, says Kathleen Brooks, research director at City Index.

Sterling is currently up 1.25% against the dollar at $1.2450, and incidently, is also stronger against the euro, up 1.24% at €1.1224. Brooks said:

Although global markets remain at the mercy of the outcome of the US election, if Hillary Clinton does manage to win next week, then the pound may continue to outperform the G10. The Court ruling on Article 50 opens the door to a delayed Brexit, which seems a good enough excuse for the foreign exchange market to extend this pound rally further. The increase in the Bank of England’s inflation forecast could also keep upward pressure on UK Gilt yields, which are the building blocks of a stronger pound, in our view.

Overall, US election fears weighing on the dollar, and Brexit fears temporarily receding, could trigger a break above 1.25 in the pound/dollar in the near term. If this happens then we could see the pound/dollar move towards the 1.25-1.30 range between now and the Fed meeting in December.

Back with the Bank of England and its forecast changes, Unicredit Research is now expecting UK interest rates to remain on hold next year.

Daniel Vernazza, its lead UK economist, said:

The tone of the Inflation Report, MPC minutes and the Governor’s press conference were notably “less dovish” than we had expected. In particular, the MPC said monetary policy could now move in “either direction” to changes to the economic outlook, cancelling its guidance from August that a cut was the most likely next move. As a result, we have now cancelled our expectation for a cut in the bank rate in February next year. We now expect the MPC to remain on hold throughout 2017. So, what’s changed in the last three months?

First, economic activity has been much stronger than the BoE had expected...Second, the further depreciation of sterling since the beginning of October will push up inflation meaningfully over the forecast period.

Skipping across the Atlantic for a moment, and news of a slowdown in US service sector growth, partly due to caution about next week’s election.

The ISM non-manufacturing index fell from 57.1 in September to 54.8 last month, below expectations of a level of 56.

Anthony Nieves, chair of the ISM non-manufacturing survey committee, said:

There has been a slight cooling-off in the non-manufacturing sector month-over-month, indicating that last month’s increases weren’t sustainable. Respondent’s comments remain mostly positive about business conditions and the overall economy. Several comments were made about the uncertainty on the impact of the upcoming U.S. presidential election.

Meanwhile orders for manufactured goods rose by 0.3% in September, up from 0.4% the previous month, the third straight month of increases.

Following the figures the Dow Jones Industrial Average is up 37 points or 0.2%. The dollar is still down against the pound, with sterling at $1.2453, up 1.26% following the High Court Brexit decision and the Bank of England deciding not to cut interest rates again.

Howard Archer, economist at IHS Markit, is now forecasting UK interest rates to stay at 0.25% for some time. He also expects growth to be slower than the Bank is predicting but inflation to be higher:

We are dropping our expectation that interest rates will be taken down to a low of 0.10%

We now believe that it is more likely than not interest rates will stay at 0.25% for a prolonged period (very possibly to 2020). Ahead of the November MPC meeting and Quarterly Inflation Report, we had considered it most likely that interest rates would be taken down to 0.10% but not until the second quarter of 2017 when we expected economic activity to be increasingly pressurised by Brexit uncertainty (following the anticipated triggering of Article 50) and diminishing fundamentals for consumers.

We are actually more pessimistic than the Bank of England on growth but see inflation higher. Specifically, we forecast GDP growth to slow from 2.1% in 2016 to 1.1% in 2017, then improve only gradually to 1.3% in 2018 and 1.5% in 2019. We see consumer price inflation moving above3% in late-2017 and peaking around 3.5% around spring 2018.

It is also notable that Mr. Carney observed that the UK has an outstanding framework for monetary policy, which works well and does not need to be adjusted. This follows recent comments by politicians that could be construed to threaten the Bank of England’s independence as well as some attacks on Mr. Carney and the MPC – particularly on their stance on the risks from Brexit.

The TUC is also worried that households face a severe wage squeeze next year, as the weaker pound drives up inflation.

TUC General Secretary Frances O’Grady fears Britain can’t afford a second dose of falling real wages (as seems possible, if companies don’t provide inflation-busting pay rises).

O’Grady says:

“The Bank’s warning must spur the government into action so that workers don’t pay the price of Brexit with a squeeze on wages.

“UK workers already suffered the largest fall in real wages after the financial crisis of any developed country except Greece – they can’t afford another hit to their pay packets.

“The Chancellor should use the Autumn Statement to protect jobs and wages, with new investment in infrastructure like roads, rail, green energy and homes. And the national minimum wage must be increased to keep it well ahead of inflation.”

And here’s a reminder of the BoE’s new ‘fan chart’, showing how it expects inflation to romp upwards in 2017 and 2018.

Ian Kernohan, Economist at Royal London Asset Management, agrees with Mark Carney that households are going to find life tougher next year, as Brexit uncertainty continues to swirl.

He says:

GDP growth is likely to slow next year, on the back of a squeeze in real household incomes and ongoing Brexit uncertainty.”

If you’re just tuning in, here’s Katie Allen’s news story about how UK interest rates were left on hold today:

A final question.... is there an inflation level that would force the Bank to take action?

Carney won’t be lured into setting a figure -- perhaps burned by his previous experience of forward guidance.

It all depends what is causing prices to rise over target, and what the best response is.

Hugo Duncan of the Daily Mail tries to get some new forward guidance out of the governor.

Q: Can you tell us whether the next move in interest rates is more likely to be up, or down?

You can see scenarios where it goes either way, we don’t have a bias, Mark Carney replies.

But the monetary policy committee currently unanimously believes that the present stance is right.

Q: If the Brexit process isn’t completed by 2019, might you stay on longer?

Carney repeats that we’ve had enough talk about his future.

And he then warns that today’s court ruling on article 50 is just one example of the “series of events” that will take place as Britain leaves the EU, creating uncertainty.

Everything doesn’t come together until relatively late in the process, and those effects will be there in the economy.

Q: Should families who are just getting by be worried about your inflation forecasts [hitting 2.7% in 2017]?

We expect inflation to go up, Carney states bluntly, and that will hit people in the pocket.

But he then flags up that the Bank expects wage growth to be stronger by 2020.

There’s a difficult period here, but it has to be put into context.

Q: How much would the pound have to fall, and how fast, to concern you - and would you intervene in the currency markets?

Carney says the BoE doesn’t target the sterling exchange rate, but it isn’t ‘indifferent’ to it.

Ben Chu of the Independent takes the governor back to the recent criticism from pro-Brexit MPs, and the claim from former foreign secretary William Hague that central bankers had lost the plot.

Q: Is this undermining Bank independence, and should your critics take a vow of silence?

Carney grins, and slips into Canadian as he mutters “Jeez, It’s a trap”.

He then says there is a robust mechanism of accountability, including regular appearances before parliamentary committees.

The debate should be as ‘vigorous’ as necessary. And it’s important that the MPC recognises the limits of its responsibilities, he adds.

Q: Three months ago the Bank made major downward revisions to its growth forecasts, and today it’s made major upward revisions. So is there a problem with your forecasting?

Carney argues that we shouldn’t get carried away with short-term revisions.

Broadly speaking, the size of the UK economy is still expected to be roughly the same in two or three years as we thought in August.

Deputy governor Ben Broadbent weighs in too, saying that most independent forecasters expected the economy would contract after the Brexit vote. That was more negative (and thus wronger) than the Bank’s own forecasts.

Q: UK bond yields are up sharply since your stimulus package in August, so has it failed - and has monetary policy shot its bolt?

No, Carney replies. He argues that the Bank could still buy more British gilts if needed.

Carney denies that the Bank has got ahead of itself and been “presumptuous” by trying to predict the kind of Brexit deal that Britain will end up with.

Q: The bank has cut its growth forecasts for 2018, so is the pain of Brexit simply being delayed?

Carney replies that the Bank sees “very modest real income growth” in 2017 and 2018, as inflation eats into wages.

Some instant reaction:

In conclusion, Carney says that Britain has a dynamic, flexible economy, and that will help it handle the Brexit process.

Carney says that the Bank of England can look through the prospect of inflation jumping over its target, for the wider good of the economy.

But it cannot ignore inflation indefinitely.

The fall in sterling appears to reflect market expectations that Britain will have a ‘less open’ trading relationship with Europe, Carney continues.

The governor warns that the slump in the pound will have more significant implications for inflation than for growth [in other words, it’s a net negative].

And Carney then warns that people are going to be hit in the pocket, saying:

Modest supply growth ultimately means lower real income growth.

The stimulus package announced by the Bank of England in August is working, Carney declared.

He says credit is widely available, mortgage borrowing costs are lower, and unemployment is still low.

But... financial markets have taken a ‘less sanguine’ view of Brexit, he adds, pointing to the slump in the pound (down around a sixth since the referendum), and rising UK bond yields (a measure of government borrowing costs.

The Bank of England is holding a press conference right now.

You can watch it here.

Here are the key points from the Bank’s quarterly forecasts and policy decision:

• Interest rates held at 0.25% and no change to scheme announced in August to pump additional £60bn in electronic cash into the economy to buy government bonds and £10bn to buy corporate bonds
  
• GDP growth in 2016 now expected to be 2.2%, up from 2.0% forecast in August
  
• GDP growth in 2017 now expected to be 1.4%, up from 0.8% forecast in August
  
• But GDP growth in 2018 now expected to be 1.5%, down from 1.8% forecast in August
  
• Inflation rises from 1.3% this year to 2.7% in 2017 and in 2018, higher than August forecasts
  
• Inflation eases back to 2.5% in 2019 and expected to return close to Bank’s 2.0% target in 2020
  

Here’s our economics reporter Katie Allen’s first take on the Bank of England’s quarterly inflation report:

The Bank of England abandoned plans for further cuts to interest rates as it conceded the economy had stood up to the shock of June’s Brexit vote without the sharp slowdown Mark Carney and fellow policymakers had predicted.

The Bank left rates at 0.25% as expected by investors and revised up forecasts for economic growth in the final months of this year and throughout 2017, compared with their outlook published in August. But they also warned that sterling’s sharp fall would push up inflation more than previously thought. That in turn would squeeze household incomes and coupled with uncertainty about the UK’s longer-term prospects outside the EU would stem economic growth in 2018. Taking the near and long-term forecasts together the economic picture in three years’ time is slightly worse than in August’s outlook.

The forecasts accompanied a unanimous decision by the Bank’s nine-strong monetary policy committee (MPC) to leave interest rates at 0.25%, where they had been cut to in August to shore up confidence after June’s vote to leave the EU.

In comments likely to be interpreted by financial markets as ruling out any more QE or interest rate cuts any time soon, the Bank also said it could respond “in either direction” to changes in the economic outlook and used minutes from its latest policy meeting to highlight how the weaker pound pushes up inflation. The Bank also said “there are limits to the extent to which above-target inflation can be tolerated.”

The Bank of England fears that the uncertainty over Brexit will push unemployment higher, from its current rate of 4.9%

[There is a ] risk that UK-based firms’ access to EU markets could be materially reduced, which could restrain business activity and supply growth over a protracted period.

The unemployment rate is projected to rise to around 5.5% by the middle of 2018 and to stay at around that level throughout 2019.

This chart shows how the Bank has hiked its inflation forecast, and is also more optimistic about growth next year:

(these fan charts show the relative likelihood of various eventualities, with darker areas showing what’s most likely)

Positive Money’s Fran Boait wrote about the idea of ‘People’s QE’ for the Guardian last month.

Here’s a flavour:

An idea that is gaining traction is that monetary and fiscal policy could work together to deliver “monetary financing”. Under this proposal, new money would be created by the Bank as with QE, but instead would be spent into the economy by the government to boost investment, employment and incomes. It’s an idea known as people’s QE.

This might sound radical, but currently, it’s considered good if banks create money, regardless of whether they use it to lend to businesses or to blow up property bubbles. However, it’s considered taboo if the central bank creates money to finance government spending for the real economy. It’s time to break that taboo.

My colleague Katie Allen has captured some photos of the Positive Money protest against the Bank of England’s stimulus programme this morning:

As explained earlier, Positive Money want to stop the Bank of England’s quantitative easing scheme, which is now creating £425bn of new money.

Instead, it wants the government to control the money-creation process.

Positive Money’s Executive Director, Fran Boait says the BoE and the government should rethink monetary policy, rather than relying on QE and ultra-low interest rates.

She told CNBC that:

Since the crash we’ve had low interest rates, and they’ve created one of the slowest recoveries in history.

City traders believe that the High Court ruling on article 50 will trigger even more wild drama in the currency markets.

Mihir Kapadia, CEO and Founder of Sun Global Investments, predicts that the pound will be volatile.

“The historic announcement that the UK government has lost the Brexit case in High Court means that Parliament must vote on whether to trigger Article 50. Theresa May claims this is a subversion of justice whilst ‘In’ campaigners will be thrilled; one thing is for certain that current market volatility will be heightened.

The government will appeal to the Supreme Court, however if they agree with the High Court judgement there could be a big impasse with no clear route for resolution. The pound which was already rising spiked further on the news and no doubt there will be further repercussions in the markets, as we await the Bank of England’s announcement at midday today.”

Today’s rally has pushed the pound to its highest level since last month’s ‘flash crash’, when sterling slumped alarmingly in Asian trading to just $1.15.

But as this chart shows, sterling is still weaker than in September - before the Conservative Party conference ignited fears that Britain could lose membership of the single market after Brexit:

At these low levels, the pound appears to be priced for a ‘hard Brexit’

Mike Bird of the Wall Street Journal tweets:

One thing is certain - it’s mighty difficult to have much faith in the Bank of England’s new economic forecasts in the current political climate.

How can its finest minds predict UK growth and inflation in such an uncertain climate?

(reminder, the Bank releases the quarterly inflation report at noon)

Neil Wilson of ETX Capital explains why sterling has spiked this morning - and why the City is struggling to decide what happens next:

“The High Court ruling on Article 50 is a body blow for Theresa May and the Brexit-leaning ministers at the heart of government. It’s made triggering Brexit a lot trickier and has given sterling a massive shot in the arm.

The stage is now set for a fresh battle over Brexit and there is the prospect that Parliament will block Britain’s withdrawal from the EU, albeit a dim and distant one for now. We need to get more clarity on what MPs think and intend to do about this now they have a say.

In a year of political surprises, who would bet against another one? A massive grass-roots Remain campaign could tilt the balance.

The news sent the pound roaring through $1.24 before gains were pared as markets digest the news – the fact is no one really knows what the implications of this decision are yet. An appeal is coming in early December, so this is not final. Cable was last at $1.2432, its highest level in almost a month.

Even if Article 50 is triggered as planned, this judgment could underpin sterling for some time and assuage fears about a ‘hard Brexit’ if the pro-EU camps in Parliament start to dictate terms to the government in return for voting with the people. We could see this create a floor under the pound around $1.25. Politics and uncertainty continue to drive the currency markets.”

And here’s our diplomatic editor:

The pound is trading at a three-week high against the US dollar, as everyone ponders the ramifications of the government’s defeat (which we’re liveblogging here)

Some experts are predicting that parliament would give its approval for Article 50 be triggered, rather than ignore the result of June’s referendum. But that’s not definite.

The court ruling may make it harder for Theresa May to start the process by March 2017, and could even encourage the PM to hold an early general election...

The FT’s Alex Barker sums it up:

This jump in service sector growth means that all three sectors of the UK economy expanded in October.

We’d already learned this week that manufacturing growth slowed sightly, while construction activity surged.

Altogether, it shows that growth is accelerating - as firms put the immediate shock of June’s referendum behind them, and get a boost from the weaker pound.

Our Politics Live blog is tracking the article 50 ruling:

My colleague Alice Ross is braving the autumn chill....

Today will be a crucial day for the pound.

It’s bound to be volatile at noon, when the Bank of England’s new growth and inflation forecasts hit the wires.

Mark Carney could also move sterling, when he speaks to the press at 12.30pm.

Lee Hardman, Currency Analyst at MUFG, say the pound could rally if the Bank suggests further rate cuts are unlikely:

“We expect Governor Carney to reiterate in the accompanying press conference that the BoE is not indifferent to weakness in the pound.

Delivering a rate cut in the near-term could prove counter-productive if it further destabilises the pound and triggers another lurch lower increasing upside risks to inflation.”

And in just 30 minutes time, the High Court will rule on whether MPs must get a vote on whether to trigger article 50.

Hardman says the pound will spike if judges say parliament should have its say:

“We believe that a judgement in favour of requiring a vote in parliament to trigger Article 50 could trigger a sizeable short squeeze higher for the pound in the near-term. It would help ease the market’s current elevated level of pessimism regarding the risk of a harder Brexit.”

This chart shows how the Bank of England only expected the UK to grow by 0.1% in the last three months; data last week showed growth of 0.5%.

But Bloomberg also show how the public are already anticipating higher prices in the shops:

Kallum Pickering of Berenberg expects the Bank of England to say that growth and inflation in 2017 will both be higher than previously forecast.

This charts shows his new charts, vs the Bank’s August forecasts:

He also expects Mark Carney to ‘take stock’ of the UK economy today, rather than announce any more stimulus moves.

The BoE’s decision to provide extra liquidity around the vote and then to announce a suitably large monetary stimulus in response to the sharp downgrades in the market’s assessment of the UK’s economic outlook was appropriate.

A central bank needs to satisfy the markets’ need for liquidity during periods of stress to limit the risk that a modest crisis turns into a severe one. But the UK’s better-than-expected economic performance since the vote has removed the need for the BoE to act again.

Sterling is rising in early trading, as investors await news from the Bank of England at noon.

It’s up 0.3% at $1.2345, on track for its fifth ‘up day’ in a row.

A few months back, many City economists were predicting the Bank would cut interest rates to a fresh record low today.

But, with the economy performing better than feared since June – and signs that the weak pound is pushing up inflation – almost everyone expects the BoE to leave borrowing costs at 0.25%.

Kathleen Brooks of City Index explains:

Only 2 out of 58 economists polled by Bloomberg expect the BOE to cut interest rates at this meeting.

The market is currently pricing in a mere 5% chance of a rate cut on Thursday, back in September there was a 25% chance of a cut. As UK inflation and growth have both beat forecasts in recent weeks, UK interest rate expectations have drifted higher.